Commercial Residential Mixed

ucu5009 wrote: ↑ Hi,

I am a newbie andrecently started my house hunting in the GTA. I have a partner and we have no kids so we find most detached houses too big for us.

Recently my partner suggested to me to look into commercial-residential mixed properties. The attraction is having an appartment on the second floor is good enough for us and having a business tenant on the first floor to help with our mortgage payments.

We know property tax will be higher but so is rent so we’re ok with that. We just don’t have expereince with this class of property. Most of them seem to be located quite centrally which mean noise and security can be bad. Also they seem to be older buildings that may have hidden issues.

Do you have expereince living in this thpe of property? It seems to be a very specific property for very specific buyers so we are also concerned with resale in case we want to sell in the future.

Thanks

Why don't you purchased a house with a basement apartment then? Rent out the basement since you don't need all the space (and live on the main floors). Commercial properties and tenants are much more difficult in many aspects (financing, managing, renting out, selling the property...).

Thanks for the suggestion.

We have experience in both residential and commercial rental market back home. In Ontario, we don’t feel like entering the residential rental market at all. From what we gather, residential landlords in Ontario basically have no rights.

Another thing is due to work and family, we both have to travel out of Canada fairly often. Leaving our property to a residential tenant in the basement is not something we want to do without a property management comp.

All in all, for both us us, a law office/doctor office tenant suits us more in our view.

ucu5009 wrote: ↑ Thanks for the suggestion.

We have experience in both residential and commercial rental market back home. In Ontario, we don’t feel like entering the residential rental market at all. From what we gather, residential landlords in Ontario basically have no rights.

Another thing is due to work and family, we both have to travel out of Canada fairly often. Leaving our property to a residential tenant in the basement is not something we want to do without a property management comp.

All in all, for both us us, a law office/doctor office tenant suits us more in our view.

You are correct.

We have budgeted up to 1.5m to invest. Unfortunately we’re not rich enough to justify spending that much of money and may end up with a residential tenant that basically can do anything. From smoking weeds, partying, stop paying rent etc. Don’t get me wrong, not all residential tenants are bad, we just don’t want the exposure.

From our experience with commercial tenants, we will be much more protected as well as we will be confident each time we have to leave Canada for an extended period of time.

ucu5009 wrote: ↑ We are new to Canada and we have budgeted up to 1.5m to invest. Unfortunately we’re not rich enough to justify spending that much of money and may end up with a residential tenant that basically can do anything. From smoking weeds, partying, stop paying rent etc. Don’t get me wrong, not all residential tenants are bad, we just don’t want the exposure.

From our experience with commercial tenants, we will be much more protected as well as we will be confident each time we have to leave Canada for an extended period of time.

You do know that commercial tenants have their own risks... like bankruptcy for instance. In a downturn, businesses shut down... but people will still need a place to live. Also you will be paying commercial property taxes in part for properties like these which a significantly higher than residential property taxes. If and when you decide to sell it, again, there is only a specific set of people looking to buy this type of property. Yes, the Ontario LTB does tend to favour the tenant, but what could you do if the business you rent to stops paying rent and than goes bankrupt?

Hi,

I do know the risks as I have a commerial rental property back home.

I still need to study commerical rental laws in Canada to be 100% sure. However back home, if commercial tenants dont pay, landlords have the rights to cut the power, water and change the lock. Landlors can even take possession of the tenants properties inside.

In Ontario, do landlords have the same rights when dealing with residential tenants? In a downturn, people still need to live for sure but Ontario tenants can skip rents for months before they are evicted. In a downturn, once I lose my job, rent is the first thing i’ll skip. Landlords can’t evict, no impact on credits score etc... all in all, the residential market is not for us.

ucu5009 wrote: ↑ Hi,

I do know the risks as I have a commerial rental property back home.

I still need to study commerical rental laws in Canada to be 100% sure. However back home, if commercial tenants dont pay, landlords have the rights to cut the power, water and change the lock. Landlors can even take possession of the tenants properties inside.

In Ontario, do landlords have the same rights when dealing with residential tenants? In a downturn, people still need to live for sure but Ontario tenants can skip rents for months before they are evicted. In a downturn, once I lose my job, rent is the first thing i’ll skip. Landlords can’t evict, no impact on credits score etc... all in all, the residential market is not for us.

Yes you are right, the LTB, if you are planning to purchase in Ontario does not cover commercial leases... but at the end of the day, its finding the right tenant... there could be 100 good ones, but if you pick the lemon, you are screwed either way.

OP, Live/Work units which you're speaking to are popping up everywhere. Mattamy and Markham got them going first in Markham before Vaughan and elsewhere picked up on them. Now they're everywhere which is not necessarily a good thing.

They can be very lucrative but have some down side to them such as selling them in a down market. I had a trial by fire, first hand experience (the Markham model selling off an investor's portfolio} with just how difficult this can be when the market crashed in '07/'08.

You need to know and understand the specific market, size of the unit and zoning limitations in order to determine the highest and best use of both units along with the advantages or disadvantages to the taxes applicable to the commercial unit. All of which are dependent on how you hold the unit - for GST and or general income tax and capital gains purposes and dependent on how the units it must be treated because of zoning limitations.

IOW, there's a reason there are so many nail salons but very few convenience or food stores in a live/work complex because it's only something you want to undertake with very careful consideration and knowledge.

Jeremyl007 wrote: ↑ You do know that commercial tenants have their own risks... like bankruptcy for instance. In a downturn, businesses shut down... but people will still need a place to live. Also you will be paying commercial property taxes in part for properties like these which a significantly higher than residential property taxes. If and when you decide to sell it, again, there is only a specific set of people looking to buy this type of property. Yes, the Ontario LTB does tend to favour the tenant, but what could you do if the business you rent to stops paying rent and than goes bankrupt?

You can lock the door, kick out a commercial tenant and own their improvements within days.

Commercial tenancies have numerous advantages over residential tenancies but it all depends on timing, zoning, competition.

Exactly what we’re looking for. We only live 4-5 months/year in Canada and we don’t have the money to invest in a residential unit considering the risks.

Residential landlords are not protected so why should we invest? We could be dead wrong but we think the days of running away prices are over so a residential unit that won’t produce much income nor appreciate much in price is not something we would invest.